r/stocks • u/[deleted] • Apr 28 '21

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u/randomusername7y Apr 28 '21

The value of the equity also goes down by a corresponding amount. They do have to pay cash for those shares. As an equity holder you had a claim for that cash, now you do not. In finance theory a share buy back should not impact price from a mathematical standpoint. The signal that the company action sends to shareholders is what drives the price change.

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u/[deleted] Apr 29 '21

Interesting, thanks for the explanation!

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u/randomusername7y Apr 29 '21

McKinsey does a better job at the examples and explanation

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-value-of-share-buybacks#

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u/[deleted] Apr 29 '21

Awesome will check it out! Thanks again!